OFAC Issues Penalties for Russia, Sudan Sanctions Violations

Between July 2015 and November 2016, OFAC said Cameron violated the Ukraine-Related Sanctions Regulations when four of its senior managers approved contracts for its subsidiary, Cameron Romania, to supply goods to Gazprom Neft Shelf. OFAC said Gazprom Neft Shelf, a subsidiary of sanctioned OJSC Gazprom Neft, intended to use the products for its Prirazlomnaya platform, an oil-producing Russian Arctic offshore project.

Employees at Cameron Romania notified Cameron of the contracts, which senior Cameron personnel had approved, OFAC said. The agency said Cameron had “reason to know the services they were providing were in support of Arctic offshore oil-producing projects” by Gazprom because the approval requests “variously referenced the provision of oil production or exploration goods” for the project. The requests also listed the Russian Arctic as the destination for the goods.

At the time, Cameron had procedures to “review prospective transactions with Russian firms” to avoid violating U.S. sanctions, which included requiring employees to fill out a form for all transactions involving Russia to “collect information for its compliance office to determine Cameron’s legal obligation,” OFAC said. But the form didn’t “indicate” that the contracts could have violated Directive 4 of Executive Order 13662, which blocks U.S. exports that support Russian deep-water oil projects.

OFAC said four U.S. senior managers at Cameron, including two vice presidents, approved the contracts, allowing Cameron Romania to provide 111 shipments of oil production or exploration goods to Gazprom Neft Shelf. Schlumberger, now doing business as Lufkin, discovered the violations after acquiring Cameron in 2016, and the company eventually submitted a notification about the violations to OFAC in 2017. But the agency said the submission didn’t constitute a voluntary self-disclosure.

OFAC pointed to several aggravating factors, including that Cameron senior managers approved the contracts, Cameron provided a “real economic benefit” to Gazprom Neft Shelf, “acted directly contrary to U.S. foreign policy objectives,” is a “large and commercially sophisticated firm,” and was aware of sanctions risks.

Mitigating factors included the “meaningful corrective actions” taken by Cameron and Schlumberger after discovering the violations, including assigning a senior compliance manager for integrating Cameron’s operations into Schlumberger’s compliance system and implementing an automatic block on all orders with a Russia end-user reference. OFAC also said Cameron cooperated with the agency’s investigation. “Even large, sophisticated companies with OFAC compliance programs face sanctions risks if they do not develop internal controls that account for their day-to-day operations and procedures and consider how a variety of different types of conduct can implicate applicable prohibitions,” OFAC said.

In its second enforcement action, OFAC said Schlumberger Rod Lift, Inc. (SRL), formerly a subsidiary of Schlumberger Lift Solutions LLC (SLR), helped to illegally ship goods from a Schlumberger subsidiary in Canada to a Schlumberger joint venture in China for ultimate delivery to Sudan.

The violations began in 2015, when some of Schlumberger’s U.S. employees received an email from a Schlumberger joint venture in China requesting a price quote for oilfield equipment from Schlumberger’s Canadian subsidiary, which would then be delivered to a Sudan customer, OFAC said. SRL employees helped to arrange the shipment to China despite receiving “internal communications” that “clearly” stated Sudan was a sanctioned country. OFAC also said the company had written compliance documents and each employee had attended a six-hour compliance training program, which included a case study of a past violation involving Sudan.

In that case, the company had entered into a 2015 plea deal with the Justice Department over its violations of Sudan and Iran sanctions. Even though Schlumberger sent the SRL vice president a “notification” that detailed the plea agreement and the “need for ongoing and future compliance with sanctions regulations,” OFAC said SRL told the Canadian subsidiary to export the goods to the Chinese joint venture for delivery to Sudan.

OFAC said the transactions violated the now-repealed Sudanese Sanctions Regulations and wouldn’t have qualified for the agency’s general license. The agency pointed to several aggravating factors, including that SRL employees were “explicitly informed” that Sudan was sanctioned and had received compliance training about Sudan. OFAC also said employees “had reason to know” the goods would be exported to Sudan and the violations occurred while Schlumberger was still subject to its plea deal with DOJ.

OFAC said mitigating factors included Schlumberger’s cooperation with the agency’s investigation and its remedial efforts, including improved compliance programs. “Companies with integrated operations, particularly those involving or requiring participation by their U.S.-based headquarters, locations, or personnel, should ensure that global activities they engage in are compliant with OFAC’s regulations,” OFAC said. “Businesses should anticipate and account for this challenge also in the context of conducting acquisitions, including when integrating acquired companies that themselves share similar characteristics.”

​Schlumberger and Lufkin, which acquired SRL in 2020, didn’t comment.